Before Google penalized eBay's search standing, eBay authored a study claiming Google Search ads are useless

By James Robinson , written on June 19, 2014

From The News Desk

Last March, eBay issued the findings of its own internal study on Google search ads. Its conclusion? For major brands, household names, search ads don’t have any value. Last month, coinciding neatly with Google severely penalizing eBay’s search result standings, the National Bureau of Economic Research republished the results.

eBay’s hypothesis was naturally attention-getting. We’ve all belabored for a long time under the idea that online ads are infallible in their targeted, trackable excellence.

But maybe not.

One of the under-acknowledged and more ridiculous elements of Google search advertising is that Google elbows brands into buying search ads against their own company name. Go to Google right now and search for Nike. An ad for comes up right above an organic link for The two are barely distinguishable from each other. The ad has a tiny yellow “AD” sign under the top link, smaller than a pea.

If I search for ‘Nike,’ I’m likely headed for -- or some Nike property -- anyway. But there’s a good chance I click on Google’s ad if I’m not paying attention, allowing it to take credit for my visit to the site and any purchasing that I do there. It’s putting itself into a completely organic situation that would be entirely unaltered without it.

eBay ran a series of controlled tests with Steven Tadelis, a business professor at the University of California-Berkeley, and two collaborators. To start, the company pulled ads next to its own name from Yahoo and MSN, but left them running on Google. They found that these ads bought little gain for eBay, but were costing them money.

So they scrapped them. Search for eBay. Unlike Nike, its own non-advertised, for-real link comes up.

The second test was for product ads. In certain geographic regions in America, eBay stopped buying ads next to normal product keyword searches, but left them going in others. So in parts of the country if you were looking for an electric guitar or an iPhone, ads for eBay product listings would come up. In other parts of the country they wouldn’t.

The second part of this test also scored badly for Google. Frequent eBay users found their way to the site with or without the ads. The ads did lure in a smattering of new customers, but far from enough to make the campaigns pay for themselves. For every one new customer the ads scooped up, they also scooped in dozens of people who were coming to eBay anyway, all of which Google gets to take some credit for.

Which becomes doubly fascinating in light of how Google has now decimated eBay’s search standing. It has left eBay with little choice now but to pay to advertise its product pages. Search for an iPhone or an electric guitar on Google now and eBay’s product listing is nowhere to be seen on the first page. (In a surprising coincidence, eBay’s search standing was relatively much less harmed for lower ticket items like baseball cards and belt buckles.)

The lesson here? Many marketers from the SEO community have remarked to me in the past that no one ever wants to speak out against Google. It writes its own rules, which it doesn’t have to share with anyone and can find most sites in violation of if it looks close enough.

The words of Omar in The Wire come to mind. “You come at the King, you best not miss.”

But outside of the individual, eBay-level fight, we’re seeing a dose of reality set into online advertising. It’s a powerful tool, for many people. For smaller companies, without the benefit of eBay's name recognition smart use of search can help them grow their brand and sales, paying by click or conversion rather than a massive media spend.

But as eBay has raised -- and we’re seeing elsewhere -- more options, more ads, more data, more noise... isn’t always better.